China key to SARS recovery as Asia considers next moves

Blithely, I asked my friend Jane if she would bring me a collectors' item Burberry SARS mask from Singapore. That is, if she was allowed out of quarantine to attend the Cannes International Advertising Festival next month. My flippancy now makes me cringe.

Those of us outside of Asia (and Toronto) still do not understand the full impact of the SARS virus there. Because it is not a major problem in the U.S. (yet?), SARS struggled for attention through the Iraqi war. Now it does battle with news of Iraq's uneasy peace and "American Idol." But Asian executives tell me the war was not the story in Asia. SARS was. And remains so. With revelations still emerging from China, most people even now do not know what the full consequences will be.

The number of reported new cases in most countries-except China-appears to be stabilizing, but the trickledown effect to Asian economies, China's in particular, is scary. Last year, China reported 9.9% economic growth. How great and how fast the reversal there could be is frightening.

At the beginning of March, Hong Kong's excellent air carrier, Cathay Pacific, reported a record profit for 2002 despite the Sept. 11 effect. Three weeks later, analysts were discussing Cathay Pacific's potential bankruptcy. Passenger numbers in the region are down 70%. Hong Kong hotels are running at 5% occupancy.

For travel and leisure marketers, it's obviously a disaster. Even in Vietnam, the first country to bring the virus under control, and where there has not been a case reported for more than a month, tourism is down 50%.

Typically, there have been no half measures in what's now "SARSapore." The Singapore government shut down restaurants and bars and enforced a ten-day quarantine period on travelers. Singapore's gamble is on short-term pain for a faster long-term recovery. It will be safe, and be seen to be safe.

The penalties for dithering are immense. In Hong Kong, media spending in the first week of April on property advertising dropped 63% compared to the last week of March. For airlines, it was down 50%; for overseas travel, down 56%; for liquor, down 20%. But media spend on clothing cleaners and personal items increased 100% to 200%. It is terrible for KFC and McDonald's, but not for all. For the telecoms, it is an unwanted boon as the phone replaces face to face. What Coca-Cola or Tsingtao beer lose in the on-premises trade, they gain in the off- as consumption switches to the home.

Hong Kong has announced a $129 million marketing initiative to tackle SARS. It is highly sensitive given the bitter irony of the former Hong Kong tourism tagline: "Takes your breath away." Should it promote the wonders of Hong Kong yet? Or should it simply say, "It's safe here"? Marketers can do little until the virus is under control.

Asia's future is now in China's hands in more ways than previously thought. There, SARS is still spreading. Let's not forget that the doctors are still learning about what is now a mutating virus. Perhaps in the face of such a bleak assessment, Jane is right to joke back about how fetching she will look in a matching Gucci mask and shoes on the Croisette. That is, if they let her out!

Stefano Hatfield is contributing editor to Advertising Age and Creativity.